FCC lays out USF reform plan that redirects funds to broadband

The FCC finally revealed its much anticipated Universal Service Fund (USF) reform plans to redirect funds towards extending broadband service to underserved and unserved communities. Right now, the USF is used to subsidize phone service to rural areas. However, FCC Chairman Genachowski said that while the USF is spending $4.5 billion a year on phone service, it is not effectively helping to drive broadband to about 18 million rural residents.

"The costs of this broadband gap are measured in jobs not created, existing job openings not filled and our nation's competitiveness not advanced," Genachowski said in a speech on Thursday.

Under his proposed plan, which still needs buy-in from the rest of the commission, the plan has two main goals. Beginning in 2012, the Connect America Fund would begin building out broadband service to consumers with the goal of bringing broadband to the 18 million consumers that currently can't get a broadband connection.

"It will help cut the number of Americans bypassed by broadband by up to one half over the following five years, and it will put us on the path to universal broadband by the end of the decade," Genachowski said. By connecting millions of unserved Americans who are being left out of the broadband revolution, this plan will bring enormous benefits to individual consumers, our national economy, and our global competitiveness."

In addition to helping to extend wireline broadband, the Connect America Fund would include a Mobility Fund to accelerate rural mobile broadband technology deployments like LTE and WiMAX.

Overall, a number of the traditional telcos, including the six that proposed their own America's Broadband Connectivity Plan this past summer like Windstream (Nasdaq: WIN), support the idea of redirecting funds towards broadband.

"While great progress has been made within our industry to make robust broadband service available to record numbers of consumers, these broken systems have caused many living in high-cost rural areas to be left behind in this increasingly broadband-centered world," Mike Rhoda, senior vice president of government affairs for Windstream. "Refocusing support to broadband deployment in high-cost areas will reap immeasurable economic and social benefits for years to come."

Similarly, the National Telecommunications Cooperative Association (NTCA), while also an advocate of expanding broadband availability to rural areas, argues that the reforms are done in a way that don't cause major disruptions for the smaller ILECs it represents.

"As this long-running process draws to a likely close in the coming weeks, we will continue to press for common-sense reforms that recognize the unique challenges faced by small carriers and the consumers they serve in rural areas across the country," Shirley Bloomfield, NTCA's CEO said in a statement.